Is Occidental Petroleum (OXY) a Buy After a 20% Drop in 2025?

Occidental Petroleum (OXY) has experienced a 20% decline in its stock price in 2025, sparking debate among investors about its valuation and long-term prospects. This analysis evaluates OXY's investment case through three lenses: valuation, earnings momentum, and strategic pivot, leveraging recent developments such as the $9.7 billion OxyChem sale, , .

1. Valuation: A Significant Discount to DCF Estimate

, 2025 according to historical data, . . The discrepancy is partly due to lingering concerns about OXY's debt load, which , but is now being addressed through the OxyChem divestiture.

The forward P/E ratio of 28.05, while elevated compared to historical averages, is justified by OXY's improved financial flexibility post-OxyChem. Analysts at Sovereign Magazine note , aligning OXY with industry peers and unlocking capital for higher-margin upstream projects. This deleveraging could trigger credit rating upgrades, further reducing borrowing costs and enhancing shareholder returns.

2. Earnings Momentum: Strong Q3 Performance and Debt Reduction

OXY's third-quarter 2025 results underscore its operational resilience. The company reported adjusted earnings per share (EPS) of $0.64, surpassing the Zacks Consensus Estimate exceeding guidance . This outperformance was driven by robust production 1.465 million barrels of oil equivalent per day and disciplined cost management, .

Notably, to repay debt, . This progress, combined with the OxyChem sale, signals a shift from debt servicing to capital deployment in core upstream and low-carbon ventures. As CEO Vicki Hollub stated, the company is now "done with big deals" and prioritizing organic growth, a strategy that could stabilize earnings volatility and attract long-term investors.

3. Strategic Pivot: From Debt-Laden Acquirer to Focused Energy Player

OXY's strategic pivot is the linchpin of its re-rating potential. to Berkshire Hathaway eliminates a segment that but operated in cyclical chemical markets. By exiting this volatile business, OXY is refocusing on its Oil and Gas and Midstream and Marketing segments, which offer more predictable cash flows and align with the energy transition.

The company is also investing heavily in through acquisitions of and Holocene Climate Corp. Partnerships with tech giants like Microsoft and Amazon to sell carbon removal credits further position OXY as a leader in carbon management-a sector projected to grow exponentially as regulators and corporations prioritize net-zero goals.

This dual focus on upstream efficiency and low-carbon innovation mirrors broader industry trends, as highlighted by PredictStreet: "Energy companies are increasingly deleveraging and prioritizing core operations amid evolving financial and environmental challenges."

Conclusion: A Buy for Long-Term Investors

The combination of a significant valuation discount, strong earnings momentum, and a strategic pivot toward core and sustainable operations makes OXY an attractive buy for long-term investors. The DCF estimate of $236.57 suggests the market is underappreciating OXY's cash flow potential, while the OxyChem sale and debt reduction efforts are laying the groundwork for a re-rating.

However, risks remain, including commodity price volatility and execution risks in DAC technology. For investors with a 3–5 year horizon, OXY's current price offers a compelling entry point to capitalize on its transformation into a leaner, more sustainable energy company.